Sports gaming should be legal, but no on 27

This editorial board strongly supports the legalization of online sports gaming, which is legal in some form (or pending) in 26 states with no unusually ill effects. Eight other states allow sports betting at a casino or licensed sports book outlet. Largely because of the power of tribal gaming interests, California does not allow it in any form.

Americans enjoy gambling and the vast majority of gamblers do so responsibly, which is reason enough to allow it as widely as the market demands. It’s better to allow Californians to bet on, say, football games on highly regulated sites than on illegal offshore sites that lack oversight.

Readers have no doubt seen ads, funded by $364 million in contributions, regarding two measures in November that would legalize sports betting. We’ve opposed Proposition 26, which is a cynical measure promoted by the vast majority of state tribes to ban online sports betting and give them (and racetracks) a monopoly on in-person sports wagers.

Its passage would destroy the hopes of legalizing online sports betting and give tribes the legal tools to harass their longtime competitors (card rooms).

We’re favorably disposed toward the goals of competing Proposition 27, which allows sports betting on the internet and mobile devices and directs revenues to state programs to help the homeless.

As usual, the devil is in the details. Unfortunately, supporters designed it so that only large gaming companies can control the action. Most other states that allow online sports betting impose relatively modest licensing fees, whereas this measure requires a whopping $100 million fee for a license — plus $10 million each time it is renewed. The firms would pay 10% of gross proceeds to the state.

The initiative also requires online operators to be active in 10 states and to partner with a local tribe. Voters might say, “That means gaming companies are willing to pay to fund state programs.” In reality, these are anti-competitive measures that would cut out start-ups and allow big firms to gain a virtual monopoly in the nation’s largest gaming market.

The proper role of state gaming regulation is to assure the operator pays out as promised, isn’t involved with crime syndicates and operates transparently. So there’s room for some kind of bonding and fee requirement, but it would need to be low enough (as in Nevada) to allow legitimate newcomers to participate. Prop. 27 also gives a state bureau the power to collect the names of people betting on unlicensed sites, which is intrusive and creepy.

We’re also put off by the less-than-forthright manner in which supporters are pitching this initiative. “Proposition 27 is the ONLY permanent funding solution for California’s homelessness and mental health crises,” says the Yes on 27 site. Yet the homeless component is a side issue, and the revenues are unlikely to make a dent in the broader problem.

Four years ago, the U.S. Supreme Court tossed out a federal ban on sports betting, which explains ensuing state activity in this space. But it’s crucial that California gets it right — given that whatever rules voters approve now likely will remain in effect for decades.

We urge a no vote on Proposition 27 with the hopes that backers of online betting come back with something more reasonable.